February 2024 Crypto Market Forecast – Forbes Advisor

Although the US Securities and Exchange Commission finally approved 11 spot bitcoin exchange-traded funds to start trading on US exchanges in January, it wasn’t the bullish catalyst crypto investors had hoped it would be. Bitcoin and other major cryptocurrencies have struggled over the past month after generating huge returns in 2023.

Bitcoin’s weakness in January could be a sign that traders are taking profits in a sell-the-news trade following the launch of the mock ETFs. However, selling pressure unique to the popular Grayscale Bitcoin Trust (GBTC) may also be partly to blame for bitcoin’s weakness.

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January Crypto Market Performance

Bitcoin prices briefly jumped to new 52-week highs near $49,000 in January on the day the SEC approved spot bitcoin ETFs, but the world’s most valuable crypto tanked in the second half of the month. Bitcoin prices fell more than 1% overall in January, ending the month at around $42,000. Ethereum (ETH) prices fell 3% in January to end the month around $2,245.

Among the 10 largest altcoins by market capitalization, Tron (TRX) was the best January performer with a gain of 5%. Cardano (ADA) was the worst performer of the month, but it is up almost 67% overall in the past three months.

Bitcoin gained 156% in 2023, its best annual performance since 2020. Ethereum prices also rose 91% in 2023.

The total market capitalization of the global cryptocurrency market peaked at over $2.9 trillion in November 2021, but took a major hit during 2022’s “crypto winter.” The market cap has now returned to $1.6 trillion heading into February.

Spot Bitcoin ETFs Debut

On January 10, the SEC finally approved 11 spot bitcoin ETFs after years of repeated rejections. Investors have had access to SEC-approved bitcoin futures ETFs since late 2021, but the new spot ETFs are the first to invest in the cryptocurrency itself rather than cryptocurrency derivative contracts.

The following 11 SEC-approved bitcoin spot ETFs began trading on January 11:

ARK 21Shares Bitcoin ETF (ARKB) Bitwise Bitcoin ETP Trust (BITB) Fidelity Wise Origin Bitcoin Trust (FBTC) Franklin Bitcoin ETF (EZBC) Grayscale Bitcoin Trust (GBTC) Hashdex Bitcoin ETF (DEFI) Invesco Galaxy Bitcoin ETF (BTCO) iShares Bitcoin Trust (IBIT) Valkyrie Bitcoin Fund (BRRR) VanEck Bitcoin Trust (HODL) WisdomTree Bitcoin Trust (BTCW)

What Bitcoin’s Spot ETF Approval Means for Investors

GBTC, which converted from a closed-end fund to an ETF after SEC approval, has just under $29 billion in assets under management. The new iShares Bitcoin Trust from BlackRock is the largest of the new spot bitcoin ETFs with about $2.8 billion in AUM.

Nigel Green, founder and CEO of deVere Group, says the launch of spot bitcoin ETFs paves the way for institutional investors to dip their toes into the crypto market for the first time.

“This approval by the financial regulator of the world’s largest economy is a landmark moment for bitcoin and the broader crypto market and boosts prices in the long term, even if there is a sell-off in the near term,” says Green .

“The approval of bitcoin ETFs represents a resounding institutional endorsement of the cryptocurrency, marking a departure from its initial reputation as a speculative and volatile asset.”

Ben Weiss, CEO and co-founder of CoinFlip, says the spot bitcoin ETF approval was a big step in improving access to bitcoin, but it didn’t change the long-term bitcoin bull thesis.

“This ETF approval has not fundamentally changed what those in the space have known for years: Bitcoin is here to stay. Whether it’s cross-border payments for those left behind by the traditional financial system or bringing transparency to complex supply chains, crypto and the blockchain will continue to shape our world,” says Weiss.

See Bitcoin ETFs and the SEC

Crypto investors may have cheered the launch of the new spot ETFs, but the SEC has once again warned investors about the dangers of cryptocurrency investing.

“While we have approved the listing and trading of certain spotbitcoin [exchange-traded product] shares today, we have not approved or endorsed bitcoin,” SEC Chairman Gary Gensler said in a statement.

“Investors should remain cautious about the numerous risks associated with bitcoin and products whose value is tied to crypto.”

GBTC Liquidations

One dynamic that has pressured bitcoin prices since spot ETFs were approved on January 10 is the seemingly relentless bitcoin selling pressure on the Greyscale Bitcoin Trust.

The GBTC fund held more than 630,000 BTC at its peak, or about 3% of the world’s total bitcoin. However, in the first nine days following the trust’s conversion from a closed-end fund to a spot ETF, GBTC experienced more than $4 billion in outflows.

Part of GBTC’s selling pressure comes from arbitrage traders who bought GBTC when it was trading at a steep discount to its net asset value and are now closing their positions.

However, a number of estates of companies that went bankrupt during the 2022 crypto winter also still hold interests in GBTC that are likely to be liquidated in 2024. Failed crypto exchange FTX sold about 22 million shares of the GBTC fund, or about $1 billion worth, in January 2024 following the fund’s conversion to a spot ETF.

Bitcoin Magazine estimates bankruptcy estates held about 15.5% of the total shares of the GBTC fund before its conversion. Those shares represent a total of around 80,000 BTC, and it is unclear how many of these shares have already been liquidated or will be liquidated soon. FTX has reportedly already sold its entire GBTC stake.

Is A Spot Ethereum ETF Coming?

Ethereum investors were hopeful that SEC approval of spot bitcoin ETFs means approval for the first spot ethereum ETFs could be right around the corner. However, on January 25, the SEC delayed a ruling on proposed spot ethereum ETF filings from Grayscale and BlackRock.

Analysts at TD Cowen expect the SEC not to approve the first spot ethereum ETF until at least late 2025. The firm expects the SEC to continue to take a slow, deliberate approach to opening up Wall Street to cryptocurrency, and regulators will likely want to observe the recently launched spot bitcoin ETFs for a while before expanding to other cryptos. .

In the past six months, the Grayscale Ethereum Trust (ETHE) has risen 82% in price, outpacing the 21% increase in ethereum prices during that time as investors flocked to take advantage of the fund’s discount to its NAV. The ETHE fund’s discount to NAV has shrunk from more than 40% as recently as June 2023 to around 10% today.

Sebastian Heine, head of risk and compliance at Northstake, says trading action in ETHE suggests the market appears to be pricing in an eventual conversion of the fund to a spot ETF, but the trust’s remaining discount to NAV suggests investors not 100% sure. if and when that conversion will take place.

“The recent reduction in the ETHE discount indicates a strategic shift among institutional investors—more investors are buying the product rather than selling it. The ultimate expectation for ETHE in the event of an ETH ETF approval is that the ETHE investment fund will be converted to a spot ETH ETF, similar to what we saw with the Grayscale Bitcoin Trust (GBTC) product,” says Heine.

Other Crypto Headlines

In January, the US Treasury Department joined regulators from the UK and Australia in imposing additional sanctions on currency exchanges used by terrorist organization Hamas to transfer millions of dollars worth of cryptocurrency.

The Treasury Department report singled out Gaza-based financial facilitator Zuhair Shamlakh and his family, accusing them of facilitating the transfer of tens of millions of dollars from Iran to Hamas using cryptocurrency and other means.

Terraform Labs, the company behind failed stablecoins TerraUSD and Luna, officially filed for Chapter 11 bankruptcy protection on January 21st.

Terraform co-founder Do Kwon, who owns 92% of the company’s shares, is currently in prison in Montenegro after being convicted of falsifying documents. Kwon is also awaiting extradition to either the US or his home country of South Korea. He faces fraud charges in both countries.

A new report from the Financial Industry Regulatory Authority, or FINRA, said 70% of cryptocurrency advertisements by brokers may violate regulatory rules that require fair, balanced and honest communication with the public.

FINRA said it investigated communications from 17 brokerages offering digital coins to clients and found a number of potential rule violations, including inaccurate comparisons between crypto and stocks, false claims that crypto works like cash and “unclear and misleading explanations” about federal protection for crypto assets.